A lot of people might not be aware of the fact that Cloudtail is the largest seller or merchant on Amazon India, and it also is a joint venture between Amazon India and N.R. Narayana Murthy’s Catamaran Ventures. The business model was created to surpass certain loopholes in the direct selling e-commerce business.

Because of the recent FDI norms in e-commerce, a single seller (vendor) may only participate in 25% of the overall sales in the marketplace. Cloudtail has had a share much higher than this, and to continue its sales on Amazon India, it will have to let go of some key segments.

The most affected will be its smartphone business, as it tries to restrict itself from selling smartphones on Amazon. The company had already started reduced the monthly sales and now it will completely shun the phones from its inventory.

“The easiest way for Cloudtail to comply with the FDI norms is to move out of high-value categories, especially smartphones, which is estimated to contribute more than half to its revenues. The process has started and Cloudtail is currently liquidating existing stock and has stopped sourcing mobile phones,” according to a report by ET.

Cloudtail would usually be the first merchant on Amazon India to stock up the latest smartphones like the iPhones, Samsung Galaxy S and Note series, as well as the Motorola smartphones. From now on, other sellers will start getting priority on Amazon’s website.

What does it mean for Cloudtail and consumers?

For Cloudtail, it simply means channeling the business to other segments while keeping the market share down. Now Amazon’s own share will go down while independent sellers will start benefitting from this move. It was the need of the hour to move from high-sales business to a low sales business to comply with the FDI norms.

The report from ET also says, “While handset makers earlier used to bill their products and inventory directly to Cloudtail, they have now been directed to bill them to Amazon Wholesale (India) Pvt Ltd, an affiliate of Amazon.com Inc.”

Amazon India and Flipkart have opposed this in the past but it seems fair to other sellers as well. For consumers, this means almost no change. Other sellers will be brought to the front, and while the prices might not be as competent as in Cloudtail, they won’t be completely nuts.

Flipkart will have to strategically manipulate its business with WS Retail to comply with FDI norms or face strict actions. Quite a hard rule on e-commerce websites, but it seems fair to other retailers on these platforms.

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